1992 (8) TMI 165 - AT - Central Excise

Summary

Issues:
- Whether Sand Paper used in the manufacture of Plywood qualifies for MODVAT credit.
- Whether Sand Paper can be considered as a tool or accessory to the machine.
- Interpretation of the term "in or in relation to the manufacture" in the context of MODVAT credit eligibility.

Analysis:
1. The appeal was filed against the order allowing MODVAT credit for Sand Paper used in manufacturing Plywood. The original authority denied the credit, considering Sand Paper as a tool/apparatus/machinery, not a consumable input. The Appellate Tribunal noted the role of Sand Paper in smoothening plywood surfaces and its consumption during the process, concluding it qualifies as an input in the manufacturing process.

2. The Departmental Representative argued that Sand Paper, used as a polishing abrasive on rollers, should be seen as an accessory to the machine, not eligible for MODVAT credit. However, the respondents contended that Sand Paper should be viewed as part of the manufacturing process, not a tool, citing precedents where similar items were considered integral to production.

3. The Tribunal analyzed the nature of Sand Paper, referencing expert literature describing it as an abrasive material for finishing wood. The Sand Paper was mounted on drums in the sanding machines, essential for achieving a smooth finish on plywood. Drawing parallels to a previous case involving paper making machinery parts, the Tribunal concluded that Sand Paper, like wire netting and felts, does not qualify for MODVAT credit as it is essential for machine functionality but not directly involved in the manufacturing process.

4. Ultimately, the Tribunal ruled in favor of the Revenue, disallowing MODVAT credit for Sand Paper. It deemed Sand Paper as akin to parts of machinery, falling outside the scope of MODVAT credit meant to reduce duty cascading on finished products. The Tribunal considered Sand Paper as a tool or accessory excluded from MODVAT credit eligibility under Rule 57A, distinguishing it from cases where items were not classified as tools or machine accessories.

5. Consequently, the appeal of the Revenue was allowed, affirming the decision to deny MODVAT credit for Sand Paper used in the manufacturing of Plywood.